Cuppa for Mitchell at end of an era

An eclectic collection of senior media and marketing industry executives, retail shareholders, accountants and lawyers will gather at the Langham Hotel in Melbourne’s Southbank district at 10am this morning to vote on British company Aegis Group’s $363 million takeover offer for
Mitchell Communication Group
.

The meeting is not expected to produce any surprises. Mitchell founder and executive chairman
Harold Mitchell
, whose family owns 40 per cent of the Mitchell group, will vote in favour of the deal.

Several foreign investment banks, including New York-based Allen & Co, have built a combined stake of about 20 per cent as part of an arbitrage play and indicated they would vote “yes".

Kerry Stokes
’s
Seven Group Holdings
, with 2.8 per cent of Mitchell, has also indicated it will vote in favour of the takeover, which will see Australia’s largest media planning and buying business merge with Aegis’s much smaller local operation.

One Mitchell shareholder, who was one of Mr Mitchell’s first employees when he set up the media agency Mitchell & Partners in 1976, will vote her 1 million shares in favour of the deal and convert most of the shares into Aegis shares.

“I’ve heard lots of stories like that from people who have accumulated stakes in our company and will take Aegis shares," Mr Mitchell said.

Aegis offered $1.20 for each Mitchell share, or 40 Aegis shares for every 67 Mitchell shares. Mitchell shareholders will also receive a 5¢-a-share dividend for the 2010 financial year.

Mr Mitchell alone owns 30 per cent of Mitchell and will take Aegis shares, giving him 5 per cent of the company. Aegis is likely to offer him a board seat next month. Mr Mitchell said he would also join the board of one of Australia’s 50 largest listed companies.

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Stuart Mitchell, the Mitchell group’s chief executive and Harold’s son, said the merged Mitchell-Aegis operation would have combined media billings of $1.7 billion – $1.35 billion from Mitchell and $350 million from Aegis – and account for about 20 per cent of the ad revenue placed through media agencies (that is, excluding ads companies place directly with media companies).

“We’ve set some aggressive targets for the new business, including lifting that share to 30 per cent," Harold Mitchell said.

“The business has grown strongly since June 30 and there are many global Aegis clients that don’t use Aegis companies here." Harold Mitchell will be executive chairman of the merged company. He said Stuart would have “a very senior role". Aegis’s local media agency boss Lee Stephens quit last week and will leave on November 5.

Stuart, who took a seven-month sabbatical in February this year, will not be chief executive. “There will be a chief executive, but we’re not ready to say who just yet," Harold Mitchell said.

The 25 businesses in the merged company would continue to operate under their existing brands.

“There is some duplication between Mitchell and Aegis so there are opportunities for synergies, but there are no plans to merge businesses," Stuart Mitchell said.

The sale to Aegis, which made an unsuccessful offer for Mitchell in 2000, scuttled Harold Mitchell’s plan to leave his company to Stuart and daughter Amanda, who handles the family’s philanthropic foundation.

“The family will still be involved," Harold Mitchell said. “Yes, at one stage I wanted to leave it to the children, but in a rapidly changing marketing and media world we needed to get bigger and get into Asia.

“If you’re not flexible, you shouldn’t be in business."

Mitchell’s executives and advisers are not planning a celebration after today’s meeting.

“We might have a cup of tea but we won’t be doing anything out of the ordinary," Harold Mitchell said. “It will be business as usual."